According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation pared by 34bps to 21.88% y/y in July (June: 22.22% y/y), primarily driven by a sharp moderation in core inflation (-143bps to 21.33% y/y vs June: 22.76% y/y).
However, food inflation rose by 77bps to 22.74% y/y (June: 21.97% y/y). On a monthly basis, headline inflation accelerated by 31bps to 1.99% m/m (June: 1.68% m/m).
After two consecutive monthly increases, food inflation softened in July, dipping by 14bps to 3.12% m/m (June: 3.25% m/m), reflecting slower price growth in Imported Food (+1.55% m/m vs. June: +2.65% m/m) despite increased prices of Farm Produce (+3.95% m/m vs June: -13.26% m/m). We believe the appreciation of the naira (-1.30% m/m to NGN1,530.77/USD) supported the lower increases in prices of imported food items.
Similarly, core inflation slowed by 149bps to 0.97% m/m, supported by weaker price pressures in Utilities (-1.15% m/m vs. June: +0.73% m/m), Furnishings & Household Equipment (+0.17% m/m vs. June: +1.56% m/m), ICT (+1.99% m/m vs. June: +2.72% m/m), Alcoholic Beverages & Tobacco (+0.65% m/m vs. June: +0.93% m/m), and Insurance & Financial Services (+1.26% m/m vs. June: +1.54% m/m).
In contrast, price growth accelerated in Health (+1.80% m/m vs. June: +0.11% m/m), Clothing & Footwear (+0.80% m/m vs. June: +0.24%m/m), Recreation, Sport & Culture (+0.80% m/m vs. June: +0.41% m/m), Education (+0.37% m/m vs. June: -0.29% m/m), Restaurants & Accommodation (+1.90% m/m vs. June: +0.60% m/m), and Miscellaneous Goods & Services (+2.15% m/m vs. June: +0.82% m/m).
Headline Inflation May Moderate Again in August
We anticipate that inflation will maintain its downward trajectory over the near term, supported by sustained naira stability, improved food supply, and moderate increases in energy prices.
Notably, the naira has traded within the range of NGN1,520.00/USD – NGN1,545.00/USD so far in August, broadly in line with the previous month’s levels (NGN1,520.00/USD – NGN1,539.00/USD). This stability should keep the cost of imported goods steady and help anchor inflation expectations, which are often sensitive to exchange rate fluctuations.
While energy prices remain somewhat volatile, the pace of increases has been far more moderate than in the same period last year, creating room for a continued decline in the year-on-year inflation rate, particularly for core inflation.
For farm produce, supplies are expected to improve due to the onset of the green harvest, which typically peaks in August. This seasonal boost in availability is likely to exert downward pressure on farm produce prices, further easing food inflation in August.
Consequently, we expect a further decline in the headline inflation rate in August, reflecting moderation in both food and core items.
Cordros
